TPP to bring benefits, challenges to Vietnam

HANOI, April 3 (Xinhua) -- The Trans-Pacific Partnership (TPP) agreement, which is expected to be signed by the end of this year by 11 nations including Vietnam, will bring benefits as well as challenges to the country, according to experts.

The current 11 TPP members, that include Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, finished their 16th round of discussions in Singapore in mid-March.

While they all expected the negotiations to be completed this year, it may be extended up to 2014 because of the additional participation of Japan.

Ngo Chung Khanh, deputy director of the Multilateral Trade Policy Department under the Vietnamese Ministry of Industry and Trade, said once the agreement is signed, it will help the country integrate more into the global economy. Vietnam has taken part in negotiations even on thorny issues relating to labor and environment.

Khanh said once the agreement takes effect, it will open up a huge market for Vietnam's export, including to those countries where Vietnam has not yet signed a bilateral free trade agreement such as the United States, Canada and Mexico.

Professor Peter A. Petri from the U.S.-based Brandeis University also said that Vietnam will enjoy the most benefits in terms of export-import performance, foreign direct investment flows, and closer ties with international production chains.

The country's gross domestic product is expected to increase by 26.2 billion U.S. dollars, or 7.7 percent, from now to 2015, in case the number of TPP nations remains at 11. If Japan officially joins the TPP, the figures will be 35.7 billion U.S. dollars or a 10.5 percent increase.

Experts forecast that the benefits will come mostly from the United States and Japan, which are currently the country's largest export markets.

According to Petri, through the TPP, Vietnam's production will further develop since it will now join the global chain of production.

TPP will be an impetus to boosting investment and even creating the second foreign investment flows into Vietnam, the same as when the country was admitted to the World Trade Organization, Petri said.

The professor also said that many industries are leaving China and moving to India, Southeast Asian countries and East Europe. The TPP will have some influence on this switching trend and Vietnam will be an important destination.

According to the Vietnam Textile and Apparel Association (Vitas) , Vietnamese garment exports to the U.S. market have currently tax duties between 17.3 percent to 32 percent, which will be reduced to zero after the TPP agreement is implemented.

Vietnam's garment and textile exports to the United States are expected to increase from the current 7 percent to 12 to 13 percent, earning some 30 billion U.S. dollars a year by 2025. By then, the U.S. market will account for 55 percent of Vietnam's total exports of garments and textiles, over the current share of 49 percent.

But aside from advantages, the TPP may bring some challenges to Vietnam.

According to Vitas, Vietnam still imports most of its raw material for textiles and garments, mostly from China. Those countries will set up new technical barriers once the exporting duties are lowered.

Diep Thanh Kiet, deputy chairman of the Vietnam Leather and Footwear Association (LEFASO), said the TPP can generate 1 million new jobs for the footwear industry, while also increasing export volumes to the United States, which currently accounts for 47 percent of the sector's total export turnover.

However, reality shows that local footwear businesses cannot take full advantage of the opportunity as the handbag manufacturing sector has to import up to 90 percent of its raw material from China, which will hinder Vietnam's making use of the lowered taxes under the TPP.

In 2012, Vietnam earned 8.7 billion U.S. dollars from footwear exports, of which 3.3 billion dollars came from TPP nations including Japan, accounting for 46 percent of the total export value.

Vietnam should improve ways of production and trading to handle the post-TPP challenges, including changing the current sub- contract production mode which accounts for over 60-70 percent, producing new products of high competitiveness, updating regulations of the WTO and FTA, and increasing the ratio of domestically-made products, said the LEFASO official.